Israeli GPS tracking and security kit designer Starcom (STAR:AIM) is tapping investors for fresh funding today, £300,000 for extra working capital. At a placing price of 2.5p per share, the cash call appears to have been struck at a very modest 4.6% discount to yesterday's 2.62p close, unchanged today.
But is it really a 4.6% discount? In reality, the company has likely had to offer a much larger incentive to encourage new and existing investors to dig into their pockets, probably something closer to a 13% discount, and perhaps more than 20%.
These figures are our back of notebook calculations based on the assumption that funding talks were probably not completed overnight. It's a fair bet that negotiations have been ongoing for the best part of a month, a reasonably typical time frame. The 20%-plus figure is the worst case scenario, based on the stock's 3.1974p highest close over the past month on 5 October.
In fairness, it's probably more meaningful to take the average share price close over the past month, which works out at 2.885p, according to LSE share price data, or a 13.3% discount. Either way, if you had bought shares in the company at any point prior to summer 2015, you are almost certainly hugely down.
This is the microcap's third working capital fund raise in about 15-months. In June 2015 it tapped investors for £475,000 at 4p per share, then in March 2016 got its cap out again for £450,000 at 1.5p.
On both occasions ordinary private investors were excluded, only institutions, founders and directors were included. We expect the same applies to this latest round, although the language used in the Starcom announcement - 'with new and existing shareholders' - isn't specific.
Starcom continues to seed the market for its connected locking device, Watcklock, launching its latest Watchlock Pro version in June, and other tracking products. It is also fighting a litigation battle in Israel.
